LECTURE OUTLINE FOR

MKTG 25010

“Marketing”

Lecture Packet

Part 1

Spring 2009

DR. MARKS

Modified 1/14/09

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Introduction to Marketing 25010

I) Initial Background information

a) The Professor and his contact information

b) The required textbook

c) Lecture Notes and where they are available

i) When they are available

II) Prerequisite

III) Course Objectives

a) A working knowledge of marketing…

b) An understanding of marketing…

c) Knowledge of the ways in which…

d) Development of …

e) An appreciation of …

IV) Content Delivery

a) b) c) d)

V) Testing Overviewa) b)

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VI) Class Website (http://vista.kent.edu)

a) Important Items to Check Regularly

i)

ii)

iii)

b) The bulletin boards

i)

ii)

c) Other WebVista Tabs

i)

ii)

VII) Grading is based on

a)

b)

Letter grades

Course Avg.CourseGrade

Univ.GPA Course Avg.

CourseGrade

Univ.GPA

92.6+% A 4.0 76.6-79.5% C+ 2.3

89.6-92.5% A- 3.7 72.6-76.5% C 2.0

86.6-89.5% B+ 3.3 69.6-72.5% C- 1.7

82.6-86.5% B 3.0 66.6-69.5% D+ 1.3

79.6-82.5% B- 2.7 59.6-66.5% D 1.0

59.5 and below F 0.0

Students who want to become Marketing Majors must earn a “C” (2.0) or better in this course. A “C-“ (1.7) does not meet this College of Business requirement.

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VIII) Policiesa) Prerequisite: b) Enrollmentc) Academic Honestybrowse http://ec.hku.hk/plagiarism/introduction.htmbrowse http://www.personal.kent.edu/~lmarks/ethics/Plagiarism.ppt. NOTE The questions for the mini tests are copyrighted and unauthorized reproduction is prohibited.

i) Course Withdrawal Deadline: For Spring 2009 the course withdrawal deadline is Sunday, Sunday, April 5, 2009.

d) Students with disabilities

IX) Calculating your final gradehttp://www.personal.kent.edu/~lmarks/MKTG25010/gradecalculator.xls (available from WebVista as a click)

X) About the Mini Testsa) b) c)

d) e) f) g) h) i) j) k) l)

XI) Is this guy for real??? Comments from others

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XII) Cautions

a) About the mini test scoresb) About conveniencec) About the work requiredd) About the course gradee) MORE about the work requiredf) About getting behind

XIII) Final Exama) What it covers b) What it isc) When and where it is takenMUST be taken in the College of Business computer labs during finals week, 5/11/2009 to 5/15/2009d) About my Identificatione) Make up policy

XIV) To Succeeda) Mini testsb) Practice testsc) For the final

XV) Classroom Policiesa) Attendanceb) WebVista Class sitec) Questionsd) Electronicse) Courtesy

XVI) Communications Policya) How to communicate “officially”

WebVista e-mail or to lmarks@kent.edu USE MKTG 25010 at start of YOUR subject lineb) About phone messages

XVII) The Class Schedule and the Mini Test Schedule

XVIII) Our Guest Facultya) Whob) Why

i) ii)

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XIX) Guest Faculty -- Their names, titles, and organizations

NAME Title Organization

1. Tim Apel

2. Don Kosec

3. Rob Felber

4. Fred Hunt

5. Dan Muller

6. Michele Skinn

7. Gary Trinetti

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Chapter 1: Creating Customer Relationships and Value Through Marketing

I) What IS Marketing?

II) Marketing Defineda) The American Marketing Association Definition:

“Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.”

http://appserver.marketingpower.com/blog/amablog/2008/01/the_american_marketing_associa.html

b) Some controversy about the definition:

http://www.btobonline.com/apps/pbcs.dll/article?AID=/20080211/FREE/482594234/1155/ISSUEBEYOND

c) Marketing seeks to:i) ii) iii) iv)

d) It involves the idea of

III) Factors Influencing Marketing

a) The Organization

i) Mission

(1) Goals and Objectives

ii) Management and people skills

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iii) Resources

b) Society

c) Environmental Factors

d) Ways to Satisfy Needs

i)

ii)

iii)

e) The Point…

IV) Requirements for Marketing to Occura)

b)

c)

d)

V) What DO people want?To satisfy consumers’ needs, wants and desires (at a profit, through an

integrated effort of the organization), we need to understand… .a)

b)

c)

VI) Needs and Wantsa) Consumer NEEDS come from

b) Consumer WANTS are

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VII) What is a Market?

a)

b) Implications of the definition (MAD)i) ii) iii)

VIII) Marketing seeks to discover then satisfy consumer needs through research and a marketing program (see Figure 1-3)

IX) How Marketing Satisfies Consumer Needs, Wants, and Desires

a) We cannot be “all things to all people” so

X) The Marketing Mixa) The Marketing Mix represents

b) The 4 P’s of the Marketing Mixi) ii) iii) iv)

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c) Most of a firm’s marketing efforts involve

XI) Important Factors in the Marketing Environment

XII) Satisfaction through Valuea) Customer Value is unique combination of benefits received by targeted

buyers that includes quality, convenience, on-time delivery, and both before-sale and after-sale service at a specific price.

b) Example of “Satisfaction through Value”

XIII) Value Strategiesa) b) c)

XIV) Relationship Marketinga) Relationship marketing links the organization to its individual customers,

employees, suppliers, and other partners for their mutual long-term benefits.

XV) The Evolution of the Market Orientation – Marketing Management Philosophies

a) Production concept

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i) Assumes

ii) Implies

iii) Useful when

(1)

(2)

b) Product Concepti) Assumes

ii) Implies

iii) Focuses on

c) Selling Concepti) Assumes

ii) Useful for

(1)

(2)

d) The Marketing Concept

i) Assumes

ii)

iii) Three parts to the concept:

(1)

(2)

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(3)

iv) NOTES:

(1)

(2)

(3)

e) The Societal Marketing Concept

i) Assumes

ii) Relates to the Ethics of doing business

f) The Customer Relationship Era

i) ii) iii)

XVI) Marketing and:a) Synergy

i) ii)

b) Hypercompetitioni) ii)

c) Cross Functional Decision Making Teams

XVII) The Breadth and Depth of Marketing

a) Who Markets?i) Manufacturesii) Retailersiii) Service Providersiv) Nonprofit Organizations

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v) Governmentvi) And YOU!

b) What is Marketed?i) Productsii) Servicesiii) Ideasiv) Placesv) People

c) Who Buys?i) Organizationsii) Ultimate Consumers

d) Why buy? How consumers benefit:Marketing creates UTILITY:

i) ii) iii) iv)

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Chapter 2: Developing Successful Marketing and Organizational Strategies

I) Strategic Planning

II) Corporate Strategy Corporate strategy is used by ALL firms, whether profit or non-profit,

manufacturer or service, entrepreneurship or a global corporation.

III) Marketing Strategy

a) Selecting and analyzing

b) Creating and maintaining

c) Deliver a

d) Achieving

e) Profit vs. nonprofit organizations and strategy…

IV) Three levels of Strategy in Organizations

a)

b)

c)

V) Organizational Structure

a) Corporate

i)

ii)

b) Strategic Business Units ( )

i)

ii)

iii)

iv)

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VI) Functional/Department Level

VII) Levels of Strategic Market Planning

VIII) Mission Statement

a) The mission statement should be a clear and succinct representation of the enterprise's purpose for existence. It should incorporate criteria addressing concepts such as the moral/ethical position of the enterprise, public image, the target market, products/services, the geographic domain and expectations of growth and profitability.

b) The intent of the Mission Statement should be the first consideration for any employee who is evaluating a strategic decision.

c) Time-Warner Example

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IX) Goals or Objectives—Be “S.M.A.R.T.”

i) ii) iii) iv) v)

(1) Time Warner Business Services Goal is to

X) Types of Goals

a) Profitb) Sales Targets

i) In Dollarsii) In Unit Sales

c) Market Share (our percent of the market)d) Quality

i) High? Acceptable?e) Customer Satisfactionf) Efficiencyg) Employee Welfareh) Social Responsibility

i) Example—Portage County Health Services

XI) Setting Strategic Directionsa) Understanding where we are now (“Three and ½ C’s)

i) (1)

ii) iii)

b) Where do we want to go?i) ii) iii) iv) Use Portfolio Analysis to help figure it out

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Market Growth Rate

Market Dominance

XII) Product Portfolio Models – The Boston Consulting Group

a) Cash Cowsi)

(1) (2) (3) (4) (5)

b) Dogsi)

(1) (2) (3) (4)

c) Problem Childreni)

(1) (2)

d) Stari)

(1) (2) (3) (4)

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XIII) Product Portfolio Models – The Directional Policy Matrix

Market Attractiveness

Competitive PositionSTRONG Medium weak

HIGH Maintain Leadership

Challenge the Leader

Overcome, Niche, or Quit

Medium Challenge the Leader

Manage for Earnings

Harvest

low Cash Generator

Harvest Divest

XIV) Tracking Strategic Directions with Marketing Dashboardsa) What are they?b) iDashboards – Driving Business Decisions (http://www.idashboards.com/)c)

XV) The Strategic Marketing Processa) Situation Analysis with

i) Internal Factors(1) (2)

ii) External Factors(1) (2)

b) ACTIONS based on __________

Type of FactorLocation of Factor FAVORABLE UNFAVORABLE

Internal Strength Weakness

External Opportunity Threat

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c) Market-Product Focus and Goal Settingi) Market Segmentation

(1) IDENTIFY groups of buyers who (a) have common needs and (b) will respond differently to a marketing effort

ii) Target Marketing(1) SELECTION of one or more segments and developing a marketing

plan to serve them

iii) Jumbo Shrimp Marketing Example

d) The Marketing Program (the 4 P’s)

i) Product Strategy ii) Price Strategy iii) Promotion Strategyiv) Place (Distribution) Strategy

e) Figure 2-7 The Elements of the Marketing Mix MUST be blended to produce a COHESIVE marketing program!

XVI) Implementing the Marketing Plana) Obtain Resourcesb) Design the Marketing Organizationc) Develop the Schedulesd) Execute the Marketing Program

XVII) Evaluating the Results

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Chapter 3: Scanning the Marketing Environment

I) Environmental Scanninga) The process of continually acquiring information on events occurring

outside the organization to identify and interpret potential trends.i) ii)

II) Environmental Factors Affecting the Organization

III) Social Forces

a) Factors in a society that bring about changes in attitudes, beliefs, norms, customs and lifestyles.i)

IV) Demographicsa) A population’s characteristics such as age, gender, ethnicity, income, and

occupation.i) World POPClock http://www.census.gov/ipc/www/popclockworld.htmlii) U.S. Population http://www.census.gov/population/www/popclockus.html

b) Generational Cohortsi) Baby Boomers: 1946-1964ii) Generation X: 1965-1976iii) Generation Y: 1977-1994

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iv) Millennials: 1995+v) Generational Marketing

V) Social Forcesa) Marital Statusb) Cohabitationc) Blended Familyd) All Brought together in…..The Lifestage Analytic Matrix

http://www.lifestagemarketing.com/

e) Racial and Ethnic Diversityf) Cultural Trends

i. Green Marketing!

VI) Economic Forcesa) Economy

i) The factors relating to income, expenditures, and resources that affect the cost of running a business and a household

b) Macroeconomic Conditionsc) Consumer Income

i) Gross Income (amount earned in a year)ii) Disposable Income (after taxes)

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iii) Discretionary Income (after necessities)iv) Marketing use of the data…ESRI Communities

http://www.esri.com/data/community_data/index.html

d) Example: The response of FORD to the economic slowdown

VII) Technological Forcesa) Technology’s Impact on Customer Choices and Their Views of “Value”

i) Reduced costs = customers focus on other attributesii) Introduction of new productsiii) Changes to production (e.g. increased use of recycling)

b) Time Warner – Consistent Leader in Innovationc) Electronic Business Technology

i) Marketspacean information and communication based electronic exchange

environment, where physical boundaries no longer interfere with buy/sell decisions.

In a marketspace, information and/or physical goods are exchanged, and transactions take place through computers and networksii) Electronic Commerceiii) Intranetiv) Extranets

VIII) Competitive Forcesa) CompetitionOther firms/organizations/people that want to take your customers/clients from you by providing better need satisfaction than you do, can, or care to.b) Alternative Forms of Competition

i) Pure Competition(1) Large number of sellers(2) Similar Products(3) Distribution is very important

ii) Monopolistic Competition(1) Large number of sellers(2) Products are unique, but substitution can occur(3) Pricing is important

iii) Oligopoly(1) A few large competitors(2) Products are relatively similar(3) Promotion is the key to demonstrate product differences

iv) Pure Monopoly(1) A single producer(2) A unique and unsubstitutable product(3) The marketing mix is not an important factor

c) Types of Competitioni) Brand Competition

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Selling the same type of product that you do (Toyota or Ford?)i) Substitute Product Competition

Offers consumers a choice of how to spend their dollars within a broad product category (Football or Concert?)

ii) Every Company/Spending OpportunityGiven limited discretionary income, consumers must decide whether to save, donate, or spend on a variety of possible products/services

iii) HOW does a firm successfully compete?(1) By striving to gain and maintain a:

d) Response to Competitive TrendItaly “allows” wine in boxes!!

IX) Political and Legal Forcesa) Monetary and Fiscal Policies

Government Spendingb) Social Legislation and Regulation

Antipollution Lawsc) To Regulate Competition

Rules on monopolies and restraint of traded) To Protect Consumer

Regulation of Food and Drug Labels

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Chapter 4: Ethical and Social Responsibility in Marketing

I) Ethicsa) The Moral Principles and Values the guide the actions and decisions of an

individual or a groupII) Business Ethics

a) involves what is right and wrong in the workplace..and doing right.III) Business Ethics: WHO NEEDS IT?

a) “NO ONE” Because:i) It’s religion, not business.ii) Our people ARE ethical.iii) It’s for philosophers.iv) It’s Obvious--”Do Good”v) It’s preachingvi) It’s just a recent fad.vii) Ethics can’t be managed.viii) It’s the same as “social responsibility.”ix) If a firm is not in legal trouble, it’s ethical.x) Managing ethics has little practical relevance.

b) Well, maybe….BUTi) Nestle’s -- Infant formulaii) Beech-Nut -- watered apple juiceiii) Manville -- asbestos & employeesiv) E.F. Hutton -- kiting schemev) Union Carbide -- Bhopal, Indiavi) Enron – Conflicts of Interestvii) Worldcom/MCI – Inflated Accounting Reportsviii) Martha Steward – Insider Tradingix) Nike – Questionable Hiring Practices

(1) The Background(a) (b) (c)

(2) Corrective Behavior(a) (b)

IV) Figure 4-1 Four ways to classify marketing decisions according to ethical and legal relationshipsa) Unethical AND Illegal – DUH!b) Ethical AND Legal – Okay to considerc) Ethical but Illegal?d) Unethical but Legal?

V) Criticism of Marketinga) High pricesb) Deceptive practices

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c) High-pressure sellingd) Shoddy, harmful, or unsafe productse) Planned obsolescencef) Poor service to disadvantaged consumersg) WHEN THESE OCCUR, they have impact on

i) ii) iii)

VI) High Pricesa) Causes:

i) High costs of distribution and markupsii) WHY do these occur?

(1) PEOPLE WANT(a) (b) (c)

iii) High advertising and promotion costsiv) WHY do these occur?v) Excessive Markupsvi) WHY do these occur?

b) SO, markups that result in high prices often reflect services that customers WANT and are willing to pay for:i) Convenienceii) Imageiii) Safetyiv) Servicev) Return privileges, warranties

VII) Deceptive Practicesa) Deceptive Pricing

i)b) Deceptive Promotions

i)c) Deceptive Packaging

i) d) Deceptive Practices lead to:

i) Legislatione) Is Puffery Deception?

VIII) High-Pressure Sellinga) Some people are trained to deliver

i) High-pressure selling persuades people to ii) High-pressure selling can occur because

b) It DOES happeni) Confessions of a Car Salesman

(1) Bumping(2) Strong(3) Turn Over

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c) BUT, it is not “standard business practice”i)

IX) Unsafe Productsa) Products that are not made well or services that are not performed well.b) Products that deliver little benefit or that may be harmfulc) Unsafe products come from:

i) ii) iii) iv) v)

d) Example – Lead Paint on Toys made in Chinae) Example – Salmonella problems in the food supplyf) HELP via the Consumer Product Safety Commission

i) Mission “To protect consumers against unreasonable risk of injury by developing voluntary and mandatory standards, banning dangerous consumer products, issuing recalls of products already on the market, and researching potential hazards associated with consumer products.”http://www.cpsc.gov/

g) Apel on Safe/Quality Productsi) ii) iii)

X) Planned Obsolescencea) Products needing replacement before they should because they are

obsoleteb) Producers who influence consumer concepts of acceptable stylesc) Intentionally holding back attractive functional features, then introducing

them later to make old model obsolete.d) The case of the Apple iPhone

XI) Poor Service to Disadvantaged Consumersa) Poor are forced to shop in smaller stores where they pay more for inferior

goods.b) “Redlining” by national chain stores occurs in disadvantaged

neighborhoods.i) Redlining charges have also been leveled against insurers, banking,

health care providers and others.c) Poor are targeted for “rapid refunds.”

XII) Cultural Pollutiona) Mass communication media is imprecise and reaches outside target

segment,b) But, advertising keeps the cost of radio and television free and

magazines/newspaper down, andc) Consumers can opt for technologies or media that reduce or eliminate ads

XIII) Questionable Judgments in Advertisinga) Provocative ads for Clearasil have parents upset.

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b) Are such ads:i) Over the top?ii) Unethical?iii) Humorous? Funny?

c) Should they be:i) Banned?ii) Censored?iii) Or should consumer response be the main influence?

XIV) Management’s Response to the need to be ethicala) Corporate Cultureb) Codes of Ethicsc) Behavior of Top Management

i) Ombudsman for Ethicsd) MANAGING the ethical environment of your firm and its employees!e) Kosec – Ethics begins at the top!

i) ii) iii) iv) v)

f) Hunt on Ethics – It all starts at the topi) ii) iii)

XV) Good ethics IS Good Businessa) For shareholdersb) For Employeesc) For business partnersd) For Customers/Clientse) And for Society!

XVI) XVI. 2008 Proposed AMA Ethics Statement http://www.marketingpower.com/AboutAMA/Pages/Statement%20of%20Ethics.aspx

Ethical Norms and Values for Marketers

 PREAMBLEThe American Marketing Association commits itself to promoting the highest standard of professional ethical norms and values for its members. Norms are established standards of conduct that are expected and maintained by society and/or professional organizations. Values represent the collective conception of what people find desirable, important and morally proper. Values serve as the criteria for evaluating the actions of others. Marketing practitioners must recognize that they not only serve their enterprises but also act as stewards of society in creating, facilitating and executing the efficient and effective transactions that are part of the greater economy. In this role, marketers should embrace the highest ethical norms of practicing professionals and the ethical values implied by their responsibility toward stakeholders (e.g., customers, employees, investors, channel members, regulators and the host community).

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GENERAL NORMS

1.  Marketers must do no harm. This means doing work for which they are appropriately trained or experienced so that they can actively add value to their organizations and customers. It also means adhering to all applicable laws and regulations and embodying high ethical standards in the choices they make.

2. Marketers must foster trust in the marketing system. This means that products are appropriate for their intended and promoted uses. It requires that marketing communications about goods and services are not intentionally deceptive or misleading. It suggests building relationships that provide for the equitable adjustment and/or redress of customer grievances. It implies striving for good faith and fair dealing so as to contribute toward the efficacy of the exchange process.

3. Marketers must embrace, communicate and practice the fundamental ethical values that will improve consumer confidence in the integrity of the marketing exchange system. These basic values are intentionally aspirational and include honesty, responsibility, fairness, respect, openness and citizenship.  

ETHICAL VALUES

Honesty— to be truthful and forthright in our dealings with customers and stakeholders.

·   We will tell the truth in all situations and at all times.

·   We will offer products of value that do what we claim in our communications.

·   We will stand behind our products if they fail to deliver their claimed benefits.

·   We will honor our explicit and implicit commitments and promises.

 

Responsibility—to accept the consequences of our marketing decisions and strategies.

·   We will make strenuous efforts to serve the needs of our customers.

·   We will avoid using coercion with all stakeholders.

·   We will acknowledge the social obligations to stakeholders that come with increased marketing and economic power.

·   We will recognize our special commitments to economically vulnerable segments of the market such as children, the elderly and others who   may be substantially disadvantaged.

Fairness—to try to balance justly the needs of the buyer with the interests of the seller.

·   We will represent our products in a clear way in selling, advertising and other forms of communication; this includes the avoidance of false, misleading and deceptive promotion.

·   We will reject manipulations and sales tactics that harm customer trust.

·   We will not engage in price fixing, predatory pricing, price gouging or “bait-and-switch” tactics.

·   We will not knowingly participate in material conflicts of interest.

 

Respect—to acknowledge the basic human dignity of all stakeholders.

·   We will value individual differences even as we avoid stereotyping customers or depicting demographic groups (e.g., gender, race, sexual orientation) in a negative or dehumanizing way in our promotions.

·    We will listen to the needs of our customers and make all reasonable  efforts to monitor and improve their satisfaction on an ongoing basis.

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·    We will make a special effort to understand suppliers, intermediaries and distributors from other cultures.

·    We will appropriately acknowledge the contributions of others, such as consultants, employees and coworkers, to our marketing endeavors.

 

Openness—to create transparency in our marketing operations.

·   We will strive to communicate clearly with all our constituencies.

·   We will accept constructive criticism from our customers and other stakeholders.

·   We will explain significant product or service risks, component substitutions or other foreseeable eventualities that could affect customers or their perception of the purchase decision.

·   We will fully disclose list prices and terms of financing as well as available price deals and adjustments.

 

Citizenship—to fulfill the economic, legal, philanthropic and societal responsibilities that serve stakeholders in a strategic manner.

·   We will strive to protect the natural environment in the execution of marketing campaigns.

·   We will give back to the community through volunteerism and charitable donations.

·   We will work to contribute to the overall betterment of marketing and its reputation.

·   We will encourage supply chain members to ensure that trade is fair for all participants, including producers in developing countries.

 

IMPLEMENTATION

Finally, we recognize that every industry and marketing subdiscipline (e.g., marketing research, e-commerce, direct selling, direct marketing, advertising) has its own specific ethical issues that require policies and commentary. An array of such codes can be accessed through links on the AMA web site. We encourage all such groups  to develop and/or refine their industry and discipline-specific codes of ethics to supplement general norms and values.  

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Chapter 5: Understanding Consumer Behavior

I) Michele Skinn, on the importance of understanding consumers’ motivationsa) Learning the motivation isb) Understand WHY the consumer c) or yourd) Understand their motivation and then

II) A Model of Consumer Behavior, Adapted from Engle, Kollat, and Blackwell

Comments:

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III) The Purchase Decision Process Consists of Five Stagesa) Problem Recognition

b) Search

c) Alternative Evaluation

d) Choice

e) Outcomes

IV) Purchase Decision Process Stages – Problem Recognition

a) A perception that there is a difference between the

b) Influenced by:

i) Internal needs and

ii) FIRMS, which can activate Problem Recognition through marketing communications which highlight

(1)

(2)

V) Purchase Decision Process Stages – Information Search

a) First, we search

i) What types of things do we recall?

b) Then, we may search , including:

i)

ii)

iii)

VI) Purchase Decision Process Stages – Alternative Evaluation

a) HOW will the consumer

b) are the Factors that represent the brand’s characteristics (as perceived by the consumer). They are used to compare the possible brand choices.

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c) Consumers use their to compare the alternatives in their CONSIDERATION SET (also called the )

d) Understanding the CONSIDERATION SET of brands

i) Consumers’ search should yield

ii)

iii) Brands that consumers actually CONSIDER before making a purchase decision are known as

VII) Purchase Decision Process Stages – Alternative Evaluation – Belief, Attitudes, and Purchase Intention

a) As they evaluate the brand choices, consumers form and .

b) The result is including which Brand to buy, where to buy, when to buy, how to pay, etc.

VIII) Purchase Decision Process Stages – Post-Purchase Behavior

a) Consumers make the purchase (choice) based on their evaluations and their purchase intentions….and then they

b) Consumers’ Level of Satisfaction is based on their and their

i) If Perceived Performance is BELOW Expectations then consumers are

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All Brands

UnknownBrands

Unacceptable Brands

Overlooked Brands

ii) If Perceived Performance EQUALS Expectations then consumers areiii) If Perceived Performance EXCEEDS Expectations then consumers areiv) SO, Marketers should promise whatv) Some marketers will

c) is the feeling of anxiety consumers often experience when they must choose between attractive alternatives

i) It can occur REGARDLESS of the

d) Marketers help MINIMIZE dissonance by:

i) Reassuring consumers they made the right choice and minimizing product misuse through

ii) Offering ways for

iii) Being RESPONSIVE to

IX) Consumers’ Decision Making is Influenced by how INVOLVED they are with the decision

a) When consumers’ involvement is LOW, they engaged in decision making.

i) Typically, such decisions take a time to make

ii) The cost of the product is usually

iii) Consumers will only search

iv) And they consider brand or alternative

b) When consumers’ involvement is MODERATE, they engage in decision making.

i) Typically, such decisions take a time to make

ii) The cost of the product is usually

iii) Consumers will search mostly

iv) And they consider brands or alternatives

c) When consumers’ involvement is HIGH, they engage in decision making.

i) Typically, such decisions take a time to make

ii) The cost of the product is usually

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iii) Consumers will search

iv) And they consider brands or alternatives

d) Examples:

X) Psychological Influences on Consumers’ Purchase Decisions

a) Motivation – the energizing force that stimulates behavior to satisfy a need

b) Personality–A person’s tendency to respond in a consistent way to situations

c) Perception– the processes by which people select, organize, and interpret information

d) Learning–behaviors resulting from repeated experiences and from reasoning

e) Values, Beliefs, and Attitudes

f) Lifestyle–A person’s “mode of living”

XI) Psychological Influences Consumer Decision Making – Motivation

a) Maslow’s Hierarch of Needs

i) Physiological Needs: Food, water, oxygen

ii) Safety Needs: Freedom from physical harm; financial security

iii) Social Needs: Friendship, belonging, love

iv) Personal Needs: Status, respect, prestige

v) Self-actualization needs: Self-fulfillment

XII) Psychological Influences Consumer Decision Making – Personality

a) Personality is a person’s pattern of traits that influence their behaviors

i) If a person is confident, dependent, fearful, or sexual in their everyday life, these same traits likely will influence them in their style of consumer decision making

XIII) Psychological Influences Consumer Decision Making -- Perception

a) Selective Perception

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b) Selective Exposure

c) Selective Comprehension

d) Selective Retention

e) Subliminal Perception???

XIV) Psychological Influences Consumer Decision Making -- Perception

f) SO, consumers perceive marketing stimuli selectively because each individual is unique in the combination of his or her needs, attitudes, experiences, and personal characteristics.

i) AND, identical advertisements, packages, or products may be perceived very differently by consumers

XV) Psychological Influences Consumer Decision Making – Perceived Risk

a) Perceived risk involves the perceptions of the riskiness of the purchase. There are several types that marketers must understand, including:

i) Financial Risk

ii) Physical Risk

iii) Performance Risk

iv) Psychosocial Risk

b) Marketers must understand their consumers’ perceptions of risk and address them

XVI) Psychological Influences Consumer Decision Making –Learning

a) Learning involves changes in behavior resulting from observation and experience.

i) Classical Conditioning

ii) Operant Conditioning

iii) Social Learning

iv) Cognitive Learning

b) Brand Loyalty

XVII) Psychological Influences Consumer Decision Making – Attitudes and Beliefs

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a) Based on what they have learned from processing information, evaluating alternatives, making a choice, and evaluating the choice consumers

b) form beliefs about the stores, products, decision processes, and

c) form attitudes ( ) about these

d) When attitudes are POSITIVE they

e) When attitudes don’t exist (e.g., for a new or for an unknown brand) or when they are NEGATIVE they

f) Marketers attempt to Change Unfavorable Attitudes (using the 4P’s of the marketing mix) by:

i) Changing Beliefs About a Brand’s Attributes

ii) Changing the Consumer’s Perception of the Importance of the Brand’s Attributes

iii) Adding New Product Attributes

XVIII) Psychological Influences Consumer Decision Making – LifestylesLifestyle -- Individual patterns of living as reflected by interests, opinions, spending habits, and activities.

a) Psychographics -- A technique of measuring lifestyle and VALS

36Low Resources Low Innovation

Primary Motivation

Thinkers

Believers

Ideals

Achievers

Strivers

Achievement

Experiencers

Makers

Self-Expression

Innovators

Low Resources Low Innovation

Primary Motivation

Thinkers

Believers

Ideals

Thinkers

Believers

Thinkers

Believers

ThinkersThinkers

BelieversBelievers

Ideals

Achievers

Strivers

Achievement

Achievers

Strivers

Achievers

Strivers

AchieversAchievers

StriversStrivers

Achievement

Experiencers

Makers

Self-Expression

Experiencers

Makers

Experiencers

Makers

ExperiencersExperiencers

MakersMakers

Self-Expression

InnovatorsInnovators

High Resources High Innovation

XIX) Influences on Consumers’ Purchase Decisions – Sociocultural

a) Sociocultural Influences

b) Personal Influence

i) Product Trial, Brand Evaluation, Purchase Decisions, and Satisfaction can be influenced by the attitudes of “others.”

(1) Opinion Leaders

(2) Word of Mouth

(a) Buzz

c) Reference Groups

d) Family

i) Consumer Socialization

ii) Family Decision Making

(1) Family can BE the consumer

(2) Often involves CONFLICT and COMPROMISE

iii) Family Life Cycle (see Figure 5-6 from the textbook).

(1) Roles in Family Decision Making

(a) Information Gatherer

(b) Influencer

(c) Decision Maker

(d) Purchaser

(e) User

iv) Marketers must know WHO plays these roles for their products and whether/how to reach them!

v)

vi)

e) Social Class

37

(1) Social Class

(2) Upper Class

(3) Middle Class

(4) Worker/Lower Class

ii) A very strong influence on your personal values, attitudes, activities, social interactions, AND your consumer behavior (e.g., where you shop, what you buy, how you save/invest)

f) Subculture -- the subgroups within the larger, or national, culture with unique values, ideas, and attitudes

i) Hispanic

ii) African American

iii) Asian American

iv) And more

XX) Culture

XXI) Other influences

a) Situational Influences = five aspects of the purchase situation that impacts the consumer:

b) Purchase task

c) Social Surroundings

d) Physical Surroundings

e) Time (temporal) Effects

f) Antecedent (pre-existing) States

XXII) IN CONCLUSION

38

Chapter 6: Understanding Organizations as Customers

I) The Nature and Size of Organizational Markets

a) Business marketing involves the marketing of goods and services to companies, governments, or not-for-profit organizations for use in the creation of goods and services that they can produce and market to others.

i) AND, identical advertisements, packages, or products may be perceived very differently by consumers

b) Business markets include individuals and organizations that buy goods and services to:

i)

ii)

iii)

iv)

c) The Business Market includes not only manufacturing, but

i) Agriculture

ii) Resellers who buy and sell products in essentially the same form. However, they create various utilities for other businesses, including:

(1)

(2)

(3)

iii) Services, which are GROWING rapidly

iv) The Government

v) International Trade

vi) Non-for-profit Organizations

d) Muller on the Industries Timken serves

i) Growth for Timken

ii) Focused on Heavy Industries

(1)

(2)

(3)

(4)

(5)

iii) Where they can deliver value…and which are growing.

39

(1)

(2)

(3)

iv) Compared to Automotive, which may NOT be a good industry for them in the future.

II) Type and Number of Organization Establishments in the U.S.

a) Industrial (business) markets

b) Reseller markets

c) Government markets

III) Measuring Domestic And Global Industrial, Reseller, And Government Markets

a) North American Industry Classification System (NAICS)http://www.census.gov/epcd/www/naics.html

b) North American Product Classification System (NAPCS)http://www.census.gov/eos/www/napcs/napcs.htm

IV) Characteristics Of Organizational Buying

a) Demand Characteristics

i) Derived Demand -- the demand for industrial products and services is driven by, or “derived from,” demand for consumer products and services.

ii) Elasticity of Demand

(1) Inelastic Demand for many Industries (demand does not change much if price changes)

(a) Occurs when Cost is a small percent of the finished product, and

(b) When there are no close substitutes

(2) Demand can be more elastic

(a) For a single firm, which changes price

(b) In the long run

(c) If the cost of the business product is a SIGNIFICANT portion of the cost of the finished good

b) Size of the Order or Purchase and the Number of Buying Units

i) Number of Business users

40

ii) Number of Ultimate Consumers

iii) However, while there are a smaller number of organizations…

iv) Plus, they are

c) Organizational Buying Objectives

i) Businesses buy from other businesses to help them achieve their objectives, such as:(1)

(2)

(3)

d) Organizational Buying Criteria (like Consumer’s Evaluative Criteria)i) In deciding among suppliers, buyers must consider a variety of factors,

such as:

(1) Price

(2) Delivery Schedules

(3) Past Performance

(4) Production Facilities/Capacity

(5) Warranty/Claim Policies

(6) Technical Capability

(7) Quality Specifications

(a) ISO 9000 – standards for registration and certification of a manufacturer’s quality management and assurance system based on an on-site audit of practices and procedures developed by the International Standards Organization (ISO).

ii) It’s Importance

(1) Firms MUST

(a) Companies are making less and buying more from suppliers

(b) Firms cannot tolerate defective parts or supplies

(c) SO, firms need to work with fewer suppliers and develop long term relationships with them

(i) Work together to develop new products, share information on inventories, production and costs.

e) Buyer-Seller Relationships and Supply Partnerships

41

i) Supplier development is the deliberate effort by organizational buyers to build relationships that shape suppliers’ products, services, and capabilities to fit a buyer’s needs and those of its customers.

(1)

(2)

f) The Buying Center -- consists of a group of people in an organization who participate in the buying process and share common goals, risks, and knowledge important to a purchase decision.

i) It is a “Cross-Functional” Group

ii) People in the Buying Center

iii) Roles in the Buying Center

(1) Gatekeepers

(2) Influencers

(3) Users

(4) Buyers

(5) Deciders

g) Buy Classes represent the “type” of buying situation (see Text Figure 6-3):

i) Straight Rebuy

ii) Modified Rebuy

iii) New Buy

h) Stages in the Organizational Purchase Decision Process

i) Problem Recognition

ii) Information Search

iii) Alternative Evaluation

iv) Purchase Decision

v) Postpurchase Behavior

vi) The Hershey’s Example:

V) ONLINE BUYING IN ORGANIZATIONAL MARKETS

i) Prominence of Online Buying in Organizational Markets

ii) E-marketplaces

(1) Online Auctions in Organizational Markets

42

Chapter 7: Understanding and Reaching Global Consumers and Markets

I) The Nature and Size of Organizational Marketsa. Why International Trade?

i. To get access to materials, products, and services which are

ii. To get access to markets which

iii. Because of the nature of Comparative Advantage1. Some countries have unique national or human

resources that give them a competitive edge, internationally

iv. Market Saturation

v. Potential Demand

vi. Customer Expectations

b. What does it mean to US?

i. Balance of Trade

1. The difference between the monetary value of a nation’s exports and imports

2. US Balance of Trade….

ii. Impact of the DHL (Germany) decision for Ohio

iii. Desire to HAVE foreign investment locally

II. Dynamics of World Trade – The Competitive Advantage of Nations

a. Porter’s “Diamond” -- WHY do some industries and firms become world leaders and others lose ground or fail?

i. Factor Conditions

1. Natural Resources

2. Education and skill levels

3. Wage Rates

a. Examples:

4. AND, the question for OUR FIRM:

43

ii. Demand Conditions

1. Size of Market

2. Sophistication of Consumers

3. Media Exposure of Products

a. Example

4. AND, the question for OUR FIRM:

iii. Related and Supporting Industries

1. Existence of Supplier Clusters

a. Examples

2. AND, the question for OUR FIRM:

iv. Company Strategy, Structure, and Rivalry

1. Number of Companies in an Industry

2. Intensity of Competition

3. Public or Private Ownership

a. Example

4. AND, the question for OUR FIRM:

b. CONCLUSION:Firms that succeed in global markets have succeeded first in intense domestic competition through:

i.

ii.

iii.

III. Marketing In A Borderless Economic World

a. Trend 1—Decline of Economic Protectionismi. Today we have an

44

ii. Should Congress create more Protectionism?1. Some argue that the benefits of today’s free trade

systems go unfairly and primarily to low-wage countries, which take jobs away from Americans.

2. These arguments are not supported by the facts.iii. Reagan said:

1. “A creative, competitive America is the answer to a changing world, not trade wars that would close doors, create greater barriers, and destroy millions of jobs. We should always remember: Protectionism is destructionism.”

iv. America's economy, over the past few decades, has proved that openness coupled with flexibility makes the economic pie much bigger and that the benefits can be widely shared.

v. Over the past 10 years, open trade has boosted job growth by more than 13 percent and has helped to raise U.S. GDP by nearly 40 percent.

vi. Protectionism in World Trade

vii. General Agreement on Tariffs and Trade (GATT)

45

PROTECTIONISM

1.

2.

3.

viii. World Trade Organization (WTO) Goals:

1. Trade Without Discrimination (Exceptions: e.g., Regional Trade Agreements)

2. Predictable and Growing Access to Markets (Example: binding tariffs)

3. Promoting Fair Competition

4. Encouraging Development and Economic Reform (Over 3/4 of its members are developing countries)

5. Patrick Low – Chief Economist WTO

a. The WTO is an

b. Including nations.

c. The WTO needs to get

d. Regional Trade Agreements have exploded and the are a challenge to trade without

e. The WTO agreements create an environment

of

f. They seek to create

in trade.

6. An aside…how many countries ARE there in the

world today?

b. Trend 2 – A Rise of Economic Integration

i. European Union

1. Consisting of

46

ii. North American Free Trade Agreement (NAFTA), Canada, U.S., Mexico

1. Consisting of

iii. Asian Free Trade Agreements

1. South Asian Free Trade Area-

a. a framework for the creation of a free trade zone covering 1.4 billion people in India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and the Maldives.

2. East Asian Free Trade Agreement in Services

c. TREND 3 — Global Competition—Who are we up against? How might we compete?

i. Strategic Alliances -- agreements among two or more independent firms to cooperate for the purpose of achieving common goals.

1. Example

ii. International Firm – International marketing done in the same way as domestic marketing

iii. Multinational Firm – Varies its Marketing Strategy for each

country

iv. Transnational Firm – Has a “Global Marketing Strategy” to keep the mix the same where there are similarities and CHANGE the mix when cultures differ.

IV. A Global Environmental Scan – What do we need to “know before we go?”

a. Cultural Diversity

i. Social and Cultural Environment

1. Family

2. Customs and Behavior

3. Education

4. Language

47

5. Impediments to understanding foreign markets:

a. Self-Reference Criteria -- an unconscious reference to one’s own values, experiences and knowledge as a basis for making certain decisions

i. Can result in

b. Ethnocentrism -- The belief that one's culture is superior to all others.

c. Examples

ii. Economic Environment

1. Infrastructure – can the country provide communications, transportation, energy, etc.?

2. Level of Economic Development

a. A general indicator of the market’s attractiveness

b. Indicator of the types of products that will be in demand

c. Gross National Income (GNI) Per Capita

3. Competition

a.

b.

4. Political Stability -- when the country is not politically stable, business risks losses!

a. Examples:

V. Global Market Entry Strategies

a. Exporting

i. Indirect Exporting

48

ii. Direct Exporting

b. Licensing

i. Contract Manufacturing

ii. Contract Assembly

iii. Franchising

c. Joint Venture

d. Direct Investment

Exporting Directly, or through Import-Export Middlemen

Company Sales Branches

Licensing Foreign Producers

Contract Manufacturing by Foreign Producers

Joint Ventures and Strategic Alliances

Wholly Owned Subsidiaries

Multinational Corporations

i. Examples

1. Licensing

49

2. Strategic Alliance

3. Multinational

VI. Product Strategies

a. Product Extension -- No change

b. Product Adaptation -- Modification

c. Product Invention – Entirely NEW

VII. Promotion Strategies

a. Same Promotion Globally

b. Adapt Promotions to Local Tastes

c. Create Entirely NEW promotions

VIII. Bringing together Product and Promotion Strategies for Global Marketing

Product Emphasis

Pro

mot

ion

emph

asis SAME Product ADAPT

ProductCreate NEW

ProductSame

Promotion as Domestically

Product extension strategy

Product adaptation

strategy

Product Invention Strategy

50

Adapt Promotion to

Foreign Culture

Communication adaptation

strategy

DUAL adaption strategy

IX. Distribution and Pricing

a. Channels Usually Long and Complex

b. Countries May Impose Pricing Constraints

51

Chapter 8 -- Marketing Research: From Customer Insights to Actions

I. The Role of Marketing Researcha) What is Marketing Research?

i) It is the process of defining a marketing problem and opportunity, systematically collecting and analyzing information, and recommending actions.

b) Implicationsi) Marketing Research is used for

(1) (2) (3)

ii) Marketing Researchers are responsible for collecting and interpreting data that supports decision making

II. Marketing Research/Program Failuresa) Apple Newton

b) Sega Dreamcast

c) Sony

i) Betamax lost to

ii) Digital Audio Tape (DAT)

iii) E-Books

d) Microsoft

i) BOB

ii) Webtv

III. The Five-step Marketing Research approach for better Actionsa) Step 1: Define the Problem

i) Set Objectives(1) The specific, measureable goals for the research (and for the

decision maker)ii) Possible Objectives:

(1) To UNDERSTAND the issues better (Exploratory Research)(2) To understand the RELATIONSHIPS better (Descriptive Research)

52

(3) To determine how to AFFECT an element of interest (Causal Research)

b) Step 2: Develop the Research Plani) Specify Constraints

(1) Financial, Timeii) Identify DATA needed for Marketing Actions

(1) What do we NEED to know to?(2)

EXAMPLE – Frontline from PBSMTV Using Marketing Research for Action!

VIACOM’s crown jewel is MTV earning ________ in profits MTV’s Problem – ________________

No longer seen as cool or creative MTV’s Objectives:

How to get closer to the audience How to learn what kids want and get closer to them

The “data plan”-- Immerse themselves in ____________ Learn what the consumer wants and deliver it to them! To ensure the bond, MTV depends on Market Research! Research to understand ___________________

Collect RELEVANT INFORMATION --TECHNIQUES: Ethnography study (Collection of Primary Data with Personal

Observation) Visit the fan in his home

Gain insight into the teenaged male What issues are important them? Dating Parents Stressors?

Develop and Present the findings. Captured on video and shown to the MTV insiders

What happens with the research? What portrait emerges? The ____________..???!!!! He is crude, loud, obnoxious, and in your face.

And the ACTION…he influences a great deal of programming! Tom Green Daredevils Spring Break Comedy Central South Park The Man Show

Criticism -- Are we capturing the “person?” Revenues depend on being ahead of the curve! Professional Wrestling Huge with the audience

53

iii) Determine HOW to collect the data(1) Sampling

(a) Probability Sampling (i.e., Random Sampling)(b) Nonprobability Sampling(c) Ability to make statistical inferences

c) Step 3: Collect Relevant Information

i) Types of Data(1) Secondary Data

(2) Primary Data

Muller on Marketing Research at Timkeno Timken does Marketing Research “both ways” (using internal

marketing managers)o They use research to understand their market and find o Outside firms for really big jobs

e.g. Wind Energy Marketo Faster, Global

54

DataFacts and figures pertinent to the problem

Secondary DataFacts and figures already recorded prior to the project

Primary DataFacts and figures collected for the project

Many of internal resources

Many organizations

MechanicalPersonal

Interviews and focus groupsSurvey

o Results suggest future role for Timken(3) Secondary Data

(a) Advantages(i) Fast(ii) Inexpensive(iii) May provide a “good enough” solution(iv)May point the direction for primary research

(b) Disadvantages(i) Out of Date(ii) Sample/Definitions/Categories not appropriate(iii) Not Specific Enough

(4) Primary Data(a) Advantages

(i) Focuses on the specific problem at hand(ii) Is under control of the current researchers

(b) Disadvantages(i) Costly(ii) Takes Time

(5) Syndicated Services – A source of Secondary Data(a) Companies that collect and sell common pools of data of known

commercial value designed to serve a number of clients.(b) Syndicated sources can be classified based on the unit of

measurement (households/consumers or institutions). (c) Household/consumer data can be obtained from surveys, diary

panels, or electronic scanner services. (d) Institutional data is obtained from retailers, wholesalers, or

industrial firms.(6) Primary Data

(a) Question Formats(i) Open-ended(ii) Closed-ended or Fixed Alternative(iii) Dichotomous(iv)Semantic Differential(v) Likert Scale

(b) All can be useful; the format needs to match the goal.(c) Writing the question can be an “art” that critically influences the

result!!(7) Collecting Primary Data

(a) Panels(i) An ongoing group of consumers or stores who agree to

provide information(b) Experiments

(i) Carefully control the “cause” (the “stimulus”, e.g., the ad, the price, the packaging, etc.) and measure the important “results” (the “dependent variable,” e.g., attention, beliefs, attitude, sales).

55

(c) Test Markets

d) Using information for ACTION – issuesi) Navigating information overload

(1) New ways to _______, ___________ and _________ in the extended enterprise

(2) Information Systems…On-going, organized procedure to generate, analyze, disseminate, store, and retrieve information for use in making marketing decisions.

ii) Data Mining(1) Data warehouses can be analyzed the same way as databases

(looking for predetermined patterns).(2) However, its size, it would be a slow and cumbersome process(3) More advanced statistical and artificial intelligence techniques

(called data mining) allow marketers to identify patterns and meaningful relationships!

(4) Example

e) Step 4: Develop Findingsi) Analyze the Data

(1) Using the appropriate techniquesii) Present the Finding

(1) Communicated in a clear manner for ACTION

56

Chapter 9 -- Segmenting, Positioning, and Forecasting Markets

I. The Dunkin’ Donuts Case for Segmentation

a) History

i) Started by Bill Rosenberg in Quincy MA in 1950

ii) Started Franchising in 1955

iii) By 1979 there were over 1,000 stores in the NE USA.

b) Challenges

i) Starbucks grew and consumers developed a preference for expresso coffee

ii) Krispie Kreme went public with 150 stores and lots of media attention

c) Can they all survive? Do they all serve the same “segment?”

i) Krispie Kreme was viewed as a destination visit and a dietary splurge

ii) Starbucks was viewed as an upscale “hangout”

iii) Dunkin’ Donuts was seen a being good for speed and convenience

d) Dunkin’ Donuts faces the “classic marketing challenge” of:

i) Defining its market

ii) Selecting target consumers

iii) Deciding what features, price, and promotion will be most effective!

(1) They decided to go with a strategy of “speed and price” to be the faster, cheaper, user-friendlier alternative to Starbucks.

II. Markets

a) Market Segments -- Groups of customers with different wants, buying preferences or product-use behavior

i) For example, vacationing:

(1)

(2)

(3)

b) Target Market – A market segment for which the seller designs a marketing mix

c) Market Segmentation – The PROCESS of identifying and describing POTENTIAL target markets

57

i) Market Segmentation involves aggregating prospective buyers into groups, or segments, that:

(1) Have common needs, and

(2) Will respond similarly to a marketing action.

ii) We need to target our market segment by “positioning” our offer; BUT first we need to define and describe the target market in detail.

III. Market Segmentation (another view)

a) Dividing the total market for a good or service into several smaller, internally homogenous groups.

i) Members of each group are similar with respect to the factors that influence demand

(1) For example:

(a)

(b)

(c)

b) Segmentation Benefits and Challenges

i) More efficient use of marketing resources

(1) Example

ii) Can help to create rapid growth

(1) Example

iii) Challenges – Be Careful

(1) Too much complexity can frustrate consumers

(a) Example:

IV. Process of Market Segmentation

a) Identify wants within a market

i) Market research is used to explore this with CURRENT and POTENTIAL consumers

ii) Wristwatch Example:

(1)

(2)

(3)

(4)

b) Identify the Characteristics that define the segment (what do prospective segments share that make them different from other segments with different needs/wants/desires?)

58

c) Determine the size of the segment and how well they are being satisfied by current offerings

i) Note: See the textbook for “sales forecasting techniques” that may be very valuable here.

d) This should allow us to determine the size of the segment, the urgency of the need, and the strength of the competition…hence, ____________ whether or not this seems to be appealing for us

V. Market Segmentation Conditions that indicate a useful segment

a) The segment’s size is Measurable and We can get data about the segment

b) The segment is Accessible

i)

ii)

iii)

c) The segment is _____________ enough to be profitable for us

d) Mass Customization – Treat each customer as _____________

VI. Market Segmentation – Grouping Buyers into Segments

a) Why are they buying?

i) For personal use = Final Consumer

ii) To use in the organization, to resell, or to make other products = Business Market

(1) Felber on Market Segmentation at Felber & Felber

(a) Felber & Felber has focused on the Manufacturing segment

(b) There are many manufacturing companies doing well

(c) Felber & Felber only needs a few of these to FOCUS on with their specialties

(d) Green Marketing and Early Stage Clients

(e) They apply what they learned from other clients to this segment

iii) However, while useful, this is too broad

b) Bases for Segmenting Consumer Markets

i) Geographics (Region, Size, Urban-rural, Climate)

ii) Demographic (Income, age, gender, family life cycle, social class, education, occupation, ethic background)

iii) Psychographics (e.g., VALS)

iv) Behavioral segmentation (Benefits desired, usage rates)

59

v) Examples:

(1) Age

(2) Claritas/PRIZM Segmentation

(a) As the American population becomes more diverse and affluent, demographic researchers are changing the way they define segments of American society.

(b) The marketing research firm Claritas has defined 14 distinct groups of consumers based on recent Census and consumer data that emphasize income, age, and lifestyles. Segments of each group buy the same types of cars, read the same magazines, and watch the same television shows.

URBAN SUBURBAN SECOND CITY

TOWN & COUNTRY

Urban Uptown Elite Suburbs Second City Society

Landed Gentry

Midtown Mix

The Affluentials

City Centers

Country Comfort

Middle-burbs Middle America

Urban Cores Inner Suburbs Micro-City Blues Rustic Living

(c) Claritas’ 14 segments are divided into 66 smaller clusters.

USA Today – Who We Are: Redefining our demographics

http://www.usatoday.com/news/graphics/whoweare/flash.htm

http://www.claritas.com/MyBestSegments/Default.jsp

60

INCOME

L I F E S T Y L E

(d) Useful for direct-mail promotions, retail outlet selection, decisions about the mix of products/brands to offer in the area.

(3) Behavioral Segmentation

(a) An “ideal” approach, but often hard to measure

(i) Example:

(ii) Example:

(4) Usage Rate

(a) Non-users, light users, medium users, heavy users

(i) Example:

VII. “Traditional” Target Market Strategies

a) Market aggregation (mass-market, undifferentiated market, one size fits all)

i) A single marketing mix to all consumers – VERY UNCOMMON “shotgun” approach

ii) Potential Advantages;

(1)

(2)

b) Product differentiation

i) Product differentiation involves using different elements of the marketing mix to help consumers see the product as being different from the competition, and “better” for the consumer

ii) Example:

c) Single-Segment Strategy (Concentration)

i) Create a single marketing mix which targets a single, well defined group

ii) Adopted as a way to “avoid” competition in the broader market

(1) Examples

iii) Instead of a “shotgun” approach, this allows us to

iv) Done correctly, this allows the marketer to focus on a “ “

(1) The consumers in the market now see the brand as or

(a) Example:

61

v) CAUTION:

(1) Example

d) Multiple-Segment Strategy

i) Identify MULTIPLE segments, and develop, market, and manage MULTIPLE marketing mix offering attempting to satisfy the needs, wants, and desires of EACH segment with a “targeted” marketing mix.

ii) Advantages:

(1)

(2)

iii) Disadvantage:

iv) Example: Muller on Segmentation at Timken

(1) Primarily by industry

(a) Primary metals

(b) Wind energy

(c) Power generation

(d) Cement

(e) Automotive

(f) Off highway construction vehicles

(2) And then further with micro segmentation

(a) Short lead time

(b) Longer life

(c) More productivity

(3) Challenge to discover the segment’s needs and to create a mix for each

v) Bayer Consumer Products Example (http://www.consumercare.bayer.com/index_en.html):

(1) Background

(a) Employees: 6,600

(b) Activities in more than 100 countries

(c) Sales: Over EUR 2 billion

(d) More than 170 brands worldwide

(e) Global Headquarters: Morristown, NJ

62

(f) Bayer HealthCare's OTC brands are manufactured around the globe in Europe, North America and Latin America, as well as in Asia.

(2) 5 Major Segments

(a) Analgesics: Bayer Aspirin, Aleve, Aktren, and Midol

(b) Gastrointestinal: Alka-Seltzer, Lefax, Phillips Milk of Magnesia, Rennie, and Talcid

(c) Dermatological: Bepanthen, Bepanthol, Canesten

(d) Cough and cold remedies: Alka-Seltzer Plus, Aleve Cold & Sinus, and Tabcin

(e) Multivitamins and dietary supplements: Berocca, One-A-Day, Flintstones (complete, gummies, plus, my first flintstones)

http://www.bayerhealthcare.com/scripts/pages/en/company/profile/divisions/consumer_care/index.php

(3) 2 Segments WITHIN Aspirin

(a) Aspirin Regimen

(b) Aspirin for Pain Reliefhttp://www.bayeraspirin.com/products/products.htm

(c) Multiple offerings within each segment

VIII. Selecting a Target Market – Guidelines

a) BEFORE selecting a segmentation strategy, determine the DESIRABILITY of the segments.

b) Compatibility with the company’s goals

c) A good MATCH with the company’s resources

i) Example:

d) Expected PROFITS that justify the investment

i) The segment is large enough

ii) The segments is expected to grow

iii) We can reach the segment at a reasonable cost

(1) Example:

e) Our competitive position is good.

IX. Positioning the Product

a) Creating and maintaining in the minds of target market consumers a particular image relative to competing products

i) Example:

63

b) Consumers often form mental “positions” for brands that will simplify their decision making – OUR “position” in their mind is of critical importance!

c) Three steps to Positioning a product

i) Select a Position Concept

ii) Design the features that conveys the position

iii) Create a coordinated marketing mix to convey the position to the target consumers

d) The Perceptual Map as a product positioning tool

i) Analyze the Map and select the positioning concept

ii) Design the dimension or the product feature that most effectively conveys the position

iii) Coordinate the marketing mix components to convey a consistent position to the target audience

iv) Of course, this can only work if it is a “good” segment.

X. Positioning Errors

a) Underpositioning:

i) Failing to position the brand very well.

(1) Examples:

ii) Overpositioning:

iii) Giving buyers too narrow a picture of the company.

(1) Example

iv) Confused Positioning:

(1) Claiming two or more contradicting benefits OR changing positions often

(2) Leaving buyers with a confused image of a company.

(a) Example

XI. Basic Positioning Platforms

a) Premium Positioning or status symbol

b) Value for money

c) Friend / family values /warmth

d) Problem Solver

e) “Fun”

64

f) Trendy / stylish

g) Role model/ user imagery (reliability, trust, quality, premium); Celebrity endorsements

h) Anti-establishment / rebel

i) Technology leader / Innovation

j) Service Leader

i) NOTE: It would be simplistic to look at these platforms as independent and exclusive. Many brands can (and do) span more than one platform.

Chapter 10 -- Developing New Products and Services

I. New Products? Who needs ‘em?

II. Great Ideas are the cornerstone of business success

a) Imaginatik – Idea Central

III. Understanding the terms

a) What is a “product”?

i) A set of

ii) May be a

iii) Which provide satisfaction of in the form of .

iv) And is exchanged for

b) The “Total Product”

i) A Broad spectrum [bundle] of tangible and intangible benefits

ii) Primary Characteristics:

(1)

iii) Auxiliary Dimensions:

(1) Example: Ultrabrite Advanced Whitening Toothpaste

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Core Product – Ultrabrite Toothpast

e

III. Understanding the terms

c) Product Line

i) A group of closely related products that satisfy

ii) a class of needs,

iii) are used together,

iv) are sold to the same customer group,

v) are distributed through the same type of outlets,

vi) or fall within a given price

vii) EXAMPLE: Product Lines at Church & Dwight Co. Inc.

(1) Consumer Product Lines:

(a) Household Deodorizers

(b) Household Cleaners

(c) Oral Care Products

(d) Laundry Products

(e) Pet Care Products

(f) Personal Care Products

(g) Arm & Hammer Baking Soda

(h) Deodorant & Anti-Perspirants

d) Product Mix

i) The number of product lines offered by a company.

e) Width of Product Mix

i) The number of product lines carried (Church & Dwight is broad; Spyder Paintball is narrower)

f) Depth of Product Mix

i) Average Number of Products in each line

g) Consistency of Product Mix

i) How similar are our product lines?

ii) PRODUCT MIX EXAMPLE:

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IV. Classifying Products

a) Consumer Goods

i) products purchased by the ultimate consumer.

ii) Based on Durability/Tangibility Classification (goods-services continuum)

iii) Based on CONSUMER’S Interest

iv) CONVENIENCE PRODUCTS

(1) Characteristics:

(a) Relatively Inexpensive

(b) Purchase is regular and recurring

(c) Little Thinking Involved

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Willingness to Expend Effort for the ProductLOW High

(d) Minimal Shopping Effort

(e) Bought a most convenient location

(f) “Staple” products, like groceries, and

(g) Impulse purchases (candy bar?)

(2) STRATEGY:

(a) Make available in every possible place

(b) Must be visible inside the store

(c) Distribution is a major marketing mix factor

(d) Easy substitution by similar brands (consumer will accept another brand)

(e) Extensive advertising is used

v) Shopping Products

(1) CHARACTERISTICS:

(a) Product comparisons occur

(b) Consumer seek information

(c) Decisions are based on thought

(d) Relatively higher prices

(e) Often technology or fashion oriented

(f) Monetary & social risks

(g) Brand loyalty may be found

(2) STRATEGY:

(a) Selective distribution

(b) Consumers will seek products in less visible locations

(c) Product attributes and Quality are important

(d) Product differentiation is possible

vi) Specialty Products

(1) CHARACTERISTICS:

(a) Substitutes are not accepted

(b) Infrequently purchased

(c) Extensive Search

(d) Brand loyalty may be strong

(e) Loyalty to retailer may be as important as brand selection

(f) May travel great distances to acquire

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(2) STRATEGY:

(a) Limited distribution

(b) Consumers will seek products regardless of location

(c) Extensive product and price differentiation

(d) Strong brand image

vii) Unsought Products

(1) CHARACTERISTICS:

(a) Consumer does not know about or does not want the product (initially)

(b) Interest is likely caused by a “sudden or unexpected problem” (rain = umbrella; death = funeral plot)

(c) The consumer is not likely to be loyal and will accept substitutes

(2) STRATEGY:

(a) Limited distribution

(b) Need to advertise so consumers are aware when the need arises

(c) May require persistent and aggressive advertising and selling approach

b) Business Goods

i) products that assist directly or indirectly in providing products for resale. Also called B2B goods, industrial goods, or organizational goods.

(1) Manufactured materials and component parts: (electrical resistors, screws, electric motors, computer chips, spark plug)

(2) Process materials (raw materials): used in production, become part of finished product (chemicals, wood, wheat, cotton)

(3) Installations: primary production equipment and major capital items (buildings, computer hardware, assembly lines, oil drilling rig)

(4) Accessory equipment: (Copiers, office equipment, cell phone, hand tools)

(5) Maintenance, Repair, and Operating Supplies: facilitate routine operations (writing paper, staples, tape, Post-it notes)

(6) Services: intangible product provided by others to facilitate the firm’s production and operation (maintenance, repairs, trucking, security service, legal advice, consulting)

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V. Product Development

a) The development of new products

b) The continuous improvement of existing products

c) WHY bother?

i) Any company that does not innovate will eventually be crushed by competition or abandoned by its consumers

ii) “Innovate or Die!”

iii) EXAMPLE: Innovation at two very different companies

(1) GOOGLE

(a) Ideas come from everyone in the company – even the finance team.

(b) Open information on every project – every idea, every deadline.

(c) Favor intelligence over experience.

(d) Employees get a free day each week to innovate – 50 percent of new products come from this time.

(e) Don't politic for your idea, use data – eliminate ‘I like' for real data.

(f) Give people a vision, rules how to get there and deadlines – creativity loves constraints.

(g) Simple to use and easy to love – the money will follow this.

(2) Whirlpool(a) Stick with it – it can take up to six years to attain a big payback.

(b) Innovation alone is not enough – need operational excellence as well.

(c) Be highly practical – inventions have to be something someone will buy.

(d) At Whirlpool, sales from new product ideas less than 5 years old were less than $30 million; today they are more than $1.2 billion!!

VI. Differing Perspectives of New Products

a) Newness Compared with Existing Products – “Functionally different”

b) Newness in Legal Terms—for 6 months after “regular distribution”

i) . Management perspective:

(1) New-to-the-world products (true innovation)

(2) High Risk

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ii) Product category extensions

(1) Diversification into an established market for an existing product--BUT, new to the firm

iii) Product line extensions

(1) Additions to existing product lines

c) Consumer Perspective:

i) Continuous innovations

(1) Variations of existing products

(2) No behavior changes or new learning

ii) Dynamically continuous innovations

(1) Improvement of existing products

(2) Minor behavior changes, some new learning

iii) Discontinuous innovations

(1) New function

(2) Major behavior changes and education needed

VII. What it takes to launch ONE commercially successful new product

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Screening

Business Analysis

Development

Testing

Commercialization

Number of New Ideas

5

10

15

20

55

60

0

010 20 30 40 50 60 70 80 90

Adapted from Booze, Allen, and Hamilton 1965

One Successful New Product

Cumulative Time (percent)100100

VIII. Characteristics of Success for a New Product

a) Relative Advantage

i) An enhanced bundle of benefits

b) Compatibility

i) Similar usage or consumption, patterns, and values

c) Trialability

i) Opportunity for buyer testing through sampling or divisibility

d) Observability

i) Buyers see the newness

e) Simplicity

i) Complexity is a disadvantage which slows diffusion

f) A good marketing mix, well executed

IX. Stages in the New-Product Development Process

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SalespeopleDealersCustomersEngineersR&DCompetitorsTrade ShowsAd agenciesMarket Research

U.S. Dept of CommercePatent OfficeLicensesPrivate LabsIndependent InventorsUniversity Labs

Search forNew Product

Ideas(idea generation)

Stage 1

To Stage 2

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INTERNAL

Initial Evaluation of Market Potential

Initial Evaluation of Market Potential

Check product fit in company mission and competencies

Consider Effects on other products

INTERNAL

Raw materials supply

Patent position

EXTERNAL Concept TestsScreening and

Evaluation

Stage 2

To Stage 3

INTERNAL

Check against customer needs

Establish target market

Check competition’s position

Develop target position

Develop initial product specifications

Perform economic analysis

Revise and refine as needed

Business Analysis

Stage 3

To Stage 4

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Create PrototypeLab TestingCustomer Use TestsCustomer reaction to planned marketing mix

Feedback and RevisionRe-test by customersRe-evaluation against competition

Development&

Testing

Stage 5

To Stage 6aTest Market

To Stage 6Commercialization

Supply chain processManufacturing processManufacturing Control system processMarketing programs

Update costs and financial plansEnsure target costs are met

Development

Stage 4

To Stage 5

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Test promotion methodsCheck repurchase rateTest media mixMeasure Trade AcceptanceTest prices

Build product inventoriesDevelop additional distribution channelsRevise as neededORSimulated Test Marketing

MarketTesting

Stage 6z

To Stage 6

Ramp up ProductionRamp up purchasingActivate Quality focused control systems

Mass training of sales or service personnelDealer meetingsTrade and customer adsPress conference

Launch(Commercial-

iziation)

Stage 6

To Stage 7

X. Why New Products Faila) No Competitive Advantageb) Competitive Reactionc) Badly Positionedd) Poor Qualitye) Does Not Deliver Promised Benefitsf) Too Little Marketing Support (SYNERGY!)g) Low Perceived Valueh) Bad Estimates of Market Potential (or other marketing research errors)

i) --Forecasts are dangerous, especially those about the future!!!i) Poor estimates of Production &/or Marketing Costsj) Poor Selection of Marketing Channelsk) Rapid Change in the Marketing Environment

XI. ..so Research, Research, RESEARCH!!• Thinking about research and sample size…

– http://www.robertniles.com/stats/sample.shtml

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Analyze sales dataAnalyze profitsRevise promotion mix

Adjust product specsReallocate sales forcePhase out weak itemsEvaluation

Stage 7

Continuous Improvemtn

Chapter 11 -- Managing Products and Services

I. Introduction – “As the cycle turns…”a) Kodak Example

i) New Kodak Strategy: Just Pictures (May 4, 1994)(1) Kodak to sell:

(a) Sterling Winthrop Inc(b) pharmaceuticals and over-the-counter drugs(c) L&F Products(d) Lysol and other home and personal-care products(e) Clinical Diagnostics division(f) produces medical testing devices

(2) The reaction among financial analysts was that Kodak was finally leaving businesses that it never should have entered in the first place.

(3) The company plans to build upon its traditional film and camera business

(4) Many on Wall Street sounded a sharp note of skepticism about whether :

ii) Kodak to finish camera making (August 2, 2006 )(1) EASTMAN Kodak is to stop making cameras

iii) George Eastman(1) Film Patent 1879(2) By 1886 sold 100,000 cameras!(3) Until recently, available in most countries, with $13 Billion sales(4) Mid 1980’s until now – Two major challenges

(a) First, Fuji Film(b) Then, digital photography

(i) Their sales of film DROPPED!(5) 2003 Change of direction away from film to digital technologies

(a) To become the leader in helping people take, share, print and view images – for memories, for information, or for entertainment.

(6) Mixed Results(a) (b) (c) (d) (e)

II. PROTECT your product!!a) Polaroid vs. Kodak

i) b) As the cycle turns…

i) February 13, 2008 ….ii)

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III. Product Life Cycle

a) Aggregate demand over an extended period of time for all brands comprising a generic product category.

b) PLC and profit curves varies from product category to another, but above is the basic shape that we often see.

c) Note the NEGATIVE profits. Sales are needed to offset product development costs

d) As we move through the PLC, we must increase advertising & selling efforts & cut prices in face of competition.

e) Deciding when to enter a market can IMPACT Profitability

IV. PLC Characteristics and Implicationsa) Characteristics Introduction Growthb) Customers Innovators To the massesc) Competition Little Increasingd) Sales Low Rapid Growthe) Profits None Strong & peak

f) Marketing Implicationsg) Overall Strategy Market

Development Penetrationh) Costs High per unit Decliningi) Product Strategy Undifferentiated Improved featuresj) Pricing Strategy High Lower over timek) Distribution Strategy Scattered Intensivel) Promotional Strategy Awareness Brand Preference

m) Characteristics Maturity Decline

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n) Customers Mass market Loyal Customerso) Competition Intense Decreasingp) Sales Slow Decliningq) Profits Declining Low/none

r) Marketing ImplicationsOverall Strategy Defensive Efficient or exits) Costs Stable Lowt) Product Strategy Differentiated Pruned lineu) Pricing Strategy Lowest Increasingv) Distribution Strategy Intensive Selectivew) Promotional Strategy Brand Loyalty Reinforcement

x) WHY do brands decline?

i) ii) iii) Most competitors abandon the market, BUTiv) Some can develop small successful niche businesses.

V. Length of Product Life-Cyclea) The length of the cycle from introduction to decline varies.

i) Examplesb) Extended introduction stagec) Fadd) Indefinite Maturity stage

i) Examples(1) (2) (3)

e) The Product Life Cycle is getting shorter for most products due to:i) Imitators (“me-too”)ii) Technology advances

f) PLC and Product Categoryi) Example

g) PLC and Geographic Marketsi) Example

VI. Product Life-Cycle Managementa) Successful marketers need to do well at PREDICTING the PLC for their

product, and

b) Recognize what stage they are in and ADAPTING to it.

i) ISSUES: When to enter? When is there a Pioneering Advantage?

c) Entry Strategies

i)

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d) Managing on the Rise

i)

e) Managing During Maturity

i)f) Surviving the Decline

i) (1) During the decline stage firms may:

(a) Ensure that marketing and production programs are efficient as possible,

(b) Prune unprofitable sizes and models which decreases sales but increases profits,

(c) Run out the product to squeeze out final profits, or (d) Revitalize it (best and toughest route)

VII. Brandsa) The word “brand” is comprehensiveb) It is used both to identify the seller and to differentiate the product from

competition.c) Brand Name --Words, letters, numbers that can be vocalized

i) Exampled) Brand Mark – Symbol, design, color, lettering

i) Examplee) Trade Mark – Legal Protection of a brandf) Protecting brands

i) Exampleg) Leading Brands

i) Examplesh) Reason for Branding from the consumer perspective

i) brands make it easy to identify goods or service (and move quickly through the shopping market). Also, it helps assure consumers of consistent quality.

i) Reason for Branding from the marketer’s perspectivei) brands can be promoted and differentiated from other offerings. Also,

where loyalty is found, brands reduce price competition.(1) Are the benefits worth it??(2) Example

j) BusinessWeek’s -- Top Global Brands 2008

k) Reasons for NOT brandingi) Do not want brand ownership responsibilities:

(1) Promoting a Brand

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(2) Maintaining consistent quality(a) Product can not easily be physically differentiated

VIII. Selecting a Brand Namea) Good Brand name

i) Contributes to the product’s successb) The Challenge

i) ii) iii) Many dictionaries only have 50,00 words

(1) (2) Morphemes

iv) Should suggest the benefits or use of the product(1)

v) Should be easy to pronounce, spell, and remember(1)

vi) Should be distinctive(1)

vii) Should be adaptable to product line additions(1) (2)

viii) Can be registered and legally protected

IX. Protecting a Brand Namea) Product counterfeiting

i) Software piracy costs…ii) Drug example

b) Generic Use of the namei) Examples

ii) Becoming generic(1) (2)

iii) Protect by:(1) (2) (3)

c) Online Brand Monitoringi) ii) Warning signs

(1) Prices below acceptable levels(2) Lack of good contact information(3) Missing service and warranty information(4) Inaccurate product descriptions(5) Products sold on sites not registered to the seller(6) Sites with unsecured transactions

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X. Producer’s Branding Strategies

a) Producer’s Own Brand

i) Done by large, well financed, and well managed firms

ii)

b) Branding of Fabricating Parts and Materials

i) The producer attempts to develop a market preference for its branded parts or materials

(1) Works when the product is

(2) OR when the part is

c) Producing for Middlemen (Private Label)

i)

ii) A widespread practice

iii) The strategy is that the manufacturer’s brands will appeal to while the Middlemen’s brands will appeal to

XI. Middlemen’s Branding Strategies

i) Carry only the Producer’s Brands

(1) Avoids the Branding Responsibilities

ii) Carry BOTH the Producer and the Middleman’s brands

(1) Can create store loyalty and better profits

(2)

iii)

iv) Manufacturer Responses:

(1) Cutting prices

(2) Convincing consumers of their brand superiority

(3) Pruning product lines

v) Battle of the Brands

XII. Strategies Used by both Producers and Middlemen

a) Branding within a product mix

i) A separate name for each product

ii) The company name combined with a product (family branding)

b) Branding for Market Saturation

i)

c) Co-branding

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i) Two or more brand names on the same product

ii) Dangers

(1) Overexposure

(2) Risk to both brands if

XIII. Brand Equity

a) The value a brand adds to a product.

i)

b) Benefits

i) Reason to buy

ii) Barrier to competition

iii) Facilitates international expansion

iv) Helps product survive a crises

XIV. Brand Licensing

a) Owner grants permission to other firm to use the brand name and brand mark on products

i) Benefits to owner

(1) Profit

(2) Promotional boost

ii) Benefits to Licensee

(1) Improved likelihood of new product success

(2) Reduced cost to market

XV. Packaging – CNBC “The Entrepreneurs” example

a) Jason Osborn and Jason Wright

i) “If the next guy can do it, I can do it better!”

b) The “back story”

c) The product needs a name

i) They came up with 20 or 25 names

ii) They pick “FEED.”

(1) It describes the product.

(2) It is simple.

(3) It stands out from the 1000’s of other products.

d) The beginnings of a new brand are born

e) The product gets “rave reviews.”

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f) Now, growing their business involves several steps:

i) Writing a business plan,

ii) Getting a loan,

iii) Incorporating

iv) AND

v) More sophisticated packaging

g) Now it is time to give the brand a STRONGER IDENTITY

i) You have 1 second to get the customer’s attention

ii) You want your brand BIG and MEMORABLE.

iii) Goal: To SIMPLIFY the packaging

h) Consult a “Branding and Identity Expert”

i) What is working and what is not?

ii) Problems:

(1) Hard to read

(2) Busy

(3) Image is vague

iii) It IS legible

i) The NEW package:

i) Simple.

ii) Keeps true to the product idea.

iii) It showcases the product well.

j) NOMINATED FOR AN AWARD FOR THE PACKAGING!

k) And the WHOLE FOODS chain becomes interested!!

Chapter 12 -- Managing Services

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Introduction

“Ruby Tuesday Blows up Wrong Restaurant”

The PointIn SERVICES marketing, the “casual dining segment” HAS become a “sea

of sameness!”

The industry is not longer providing customers with “Value.”

I. Services are a Major Factor in the U.S. economy in dollars and in jobs Over

$5.5 Trillion and 116 million jobs!

II. SERVICES Defined

a) Services are the intangible activities or benefits that an organization

provides to consumers in exchange money or something else of value.

III. Increase in Services Influenced by:

a) Organizations’ focus on productivity and profits

i)

b) Consumers’ poverty of time

i) Personal Shoppers

ii) Take out food

iii) House and lawn care

IV. Affecting virtually all industries:

a) Location--ATMs, branch outlets, branch warehouses, JIT delivery

b) Longer Business Hours

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c) Better trained sales and service people

d) One-stop shopping

e) Improved customer service systems (personal, phone, on-line)

f) More information available--before, during, and after the sale

g) ADDS VALUE beyond issues of price and product quality

V. THE UNIQUENESS OF SERVICES

a) Four I’s of Services

i) _____________________

(1) Services cannot be

(2) SO it is harder to

(3) Communications must make these

(4) Setting Price can be hard

ii) _______________________

(1) Lack of standardization;

(2) inconsistent delivery and quality depending

(3) Minimize by employee selection, training, and

(4) service performance standards.

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iii) ______________________

(1) Simultaneous production and consumption means

(a) consumers are a part of the service process;

(b) We must manage the interaction for customer satisfaction;

(c) educate consumers about the service process and their role in

it.

iv) ________________________

(1) Services cannot be inventoried, so it is hard to balance capacity

and demand;

(2) cannot return service for credit or exchange;

(3) need to manage demand in peak periods; use capacity in off-

periods

(4) Idle production capacity

VI. Inventory carrying costs of services depend on the cost of employees and

equipment

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VII. Levels of Service

a) Core/Primary Services

i) The major activity of a business (or nonprofit organization).

(1) Example: Investment Services provide the use of a brokerage

account to buy and sell stocks

(a)

(b)

b) Ancillary Services

i) Expected or optional supplements to the primary purchase.

(1)

(2)

ii) Ancillary Services expected in B2B marketing

(1)

(2)

(3)

VIII. Service as Value

a) Consumers & Organizational Buyers want:

i) Quality products

ii) Right price

iii) Qualified Sales/Service personnel

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iv) Maximum benefits

v) Minimum effort

vi) Low wait times

vii) They demand _____________________!

(1) Example: The Casual Dining Industry is NOT providing “value” any

longer

(a) Casual Dining restaurants provide full-service, alcoholic

beverages, and CHECK AVERAGES from $10 to $23 per

person.

(b) COMPETITION from “fast-casual” chains are stealing

customers

(c) Fast-casual chains have no waiters and higher quality food than

fast food chains.

(i)

(ii)

IX. VALUE...

a) …an intangible concept often defined in terms of

i) exceptional customer service

ii) exceptional product quality

iii) value-based prices

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(1) Example: Some casual chains are returning to a value service

proposition

(a) MOST casual dining chains raise menu prices 1% to 3%every

six months

(i) To keep up with rising commodity and labor costs

(b) SOME try temporary discounts

(i) $9.99 dinner deals and $5.99 lunch specials

(c) Others are making it a new marketing tactic

(i) TGI Friday’s “Right Portion, Right Price” dinner menu with

smaller entrees starting at $6.99

(ii) Cheesecake Factory rolled back cheese-cake prices to

$1.50 and had LONG lines. They are now rolling out a

“customer loyalty card” with incentives to return

X. Competitive Positioning

a) Service Image is conveyed by the firm’s “service products.”

i) The dimensions used should be those valued by the customers.

(1) Example: What DO consumers want in Casual Dining?

(a) Stand for something UNIQUE

(i) Cheesecake Factory

1.

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(b) Outback

(i)

(c) Olive Garden

(i)

(d) Lower Prices

(e) BETTER FOOD

(i) Casual dining was initially successful because it provided

better food quality than fast food, at a very reasonable price

(ii) Recently, fast food’s quality has gone UP with prices rising

only slowly

(iii) BUT, casual dining’s price have risen while food quality and

innovation has stagnated!

(iv)RUBY TUESDAY is upgrading its food, but it prices are still

pretty high.

(v) IMPROVED SERVICE

1. Slow service

2. Discourteous staff

3. Are NOT what consumers are looking for!!

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a. Chili’s is trying to cut 15 minutes from its 45-minute

lunch by testing BlackBerry’s that connect directly

from the server to the kitchen.

b. Chili’s is also improving its employee hiring practices

c. And the staff is wearing more professional looking

aprons

(vi)Better looking stores

1. Most stores are 20-years old!

a. Ruby Tuesday has redesigned all of its company-

owned stores with contemporary designs and lighter

colors.

b. Lone Star is replacing concrete floor with wood and is

installing oak tables.

2. Get kid-friendly

a. Families are a big part of the casual dining industry’s

market

b. Could restaurants have kid playgrounds? Loaner

hand held video games?

XI. Service Leadership or Follow the Leader?

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a) Will you set the service standard or wait for competitors to set the

standard and then follow their lead?

i) Example:

XII. Benefits of Exceptional Customer Service

a) Exceptional Customer Service can Differentiate you from Competitors

i) Services attract & keep customers

ii) Services and recover lost sales

iii) Service quality is related to customer satisfaction

iv) Customer Service usually leads to a profitable ROI in the long term

XIII. HOW CONSUMERS PURCHASE/EVALUATE SERVICES

a) The Purchase Process

i) ________________ Properties

(1) What consumers can judge prior to the purchase

(a) Price, location, appearance of physical facilities, paperwork,

interactions with the service provider’s staff

ii) __________________ Properties

(1) Attributes discernable only during or after the service experience

(a) Physical comfort; staff concern

iii) _________________ Properties

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(1) Attributes inferred from a subjective evaluation of the entire

process.

XIV. Consumers use search, experience, and credence properties to evaluate

services

XV.

The

Service Design Process

a) Customer Targets

i) What do they want?

b) Nature of the Service

i) Complex (medicine, investments) = substantial support services and

highly qualified customer contact people

c) Pricing?

i) Who is the target?

(1) How much and how often do they buy?

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ii) What is the type of service?

iii) Can a fee be “justified?”

d) Pricing--Costs

i) Wages

ii) Physical facilities

iii) Technology & Equipment

iv) Honoring warranties and guarantees

e) Degree of Complexity/Uncertainty

i) When complex, customers may need extensive sales assistance,

demonstrations, service guarantees, after sale assistance, pre-

purchase information

f) Marketer’s Resources

i) Smaller marketers may need to outsource some customer services to

save costs (pros and cons to this).

ii) When to use customer service outsourcing

(http://www.buyerzone.com/marketing/call_center/tmm-customer-

service-outsourcing.html)

(1) Significant growth

(2) Save money

(3) Testing and learning

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(4) Variable volume

(5) Business model shifts

g) Number of Services

i) Focus on services which make a difference in consumers’ purchase

decisions

ii) Remember, customers may be willing to pay some or all of the cost of

desired services

h) Level of Service

i) Full service to self-serve?

(1) What does your market/target customer call for?

(2) What can you support?

XVI. Service Delivery

a) Top-management commitment

b) Treat EMPLOYEES as Internal Customers

c) View Service as a “Performance”

d) Ensure Service Recovery

i) When errors occur---fix ‘em!

XVII. Successful Service Recovery

a) Know the costs of losing a customer

i) For every customer who bothers to complain, there are

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ii) The average “wronged” customer will tell

iii) 91% of unhappy customers will never purchase services from you

again.

iv) It costs about _______ as much to attract a new customer as it costs

to keep an old one.

v) Each one of your customers has a circle of influence of 250 people or

potential customers who hear bad things about you!

(1) Example: Two Outback Steakhouse EX-customers have not been

back since a server and a manager argued with them very

publically about how a steak was cooked!!

b) Listen to the customer--get them to talk

c) Anticipate potential failures

d) Act fast

e) Train employees

f) Empower the front line

g) Close the Loop--get back to the customer

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